As an IT leader, CIO, or CTO, you’ll know navigating the diverse supplier vendor landscape can impede an organisation’s agility and ability to respond to market demands. If you’re not already rationalising your supplier base, this article is for you. Elevate and simplify your supplier management within your organisation to new heights, enhancing efficiency and competitiveness through better utilisation of economies of scale, improved quality and more collaborative relationships with key vendors.
Fragmented IT procurement should be a thing of the past in your organisation
Velocity is essential for success when procuring IT. Rapidly onboarding new suppliers, benchmarking new technologies, and promptly provisioning new users are crucial for staying ahead and driving competitiveness. Therefore, a fragmented approach to procurement should not be a thing in 2024 for those striving for streamlined agility. This is because it leads to multiple challenges, such as:
- Inadequate visibility of total annual spending, which leads to inaccurate budgeting and forecasting challenges.
- Overlooking value-added services from vendors that could possibly improve operational efficiency.
- Non-compliance with corporate standards, procurement regulations, and industry-specific guidelines.
- Creating a gap in the availability of consistent, detailed management information necessary for informed decision-making.
- Unauthorised expenditures on unapproved services and technologies, potentially undermining procurement strategies – also known as shadow IT.
- Increased costs due to the lack of full utilisation of economies of scale.
Organisations must intensify their rationalisation efforts to mitigate the challenges of supplier sprawl. Doing so will establish standardised, centralised, and streamlined procurement processes throughout the business, driving continuous cost savings, lowering compliance risks, and enhancing operational efficiency, among other things.
But before we discuss the organisational benefits of rationalising your supplier base, we’ll examine what is probably already happening within your company.
Diminishing vendor visibility and control
The risks and impacts of uncontrolled and fragmented procurement can be significant, potentially exposing an organisation to considerable financial and reputational damage. As a result, even the most experienced procurement specialists will struggle to keep track of the current supplier landscape, which consists of a wide range of vendors spread over different departments and office locations.
Lacking comprehensive visibility of your IT hardware fleet vendors makes it difficult to optimise investments. New devices may be purchased where existing assets could be redeployed because they are not purchased through standard procurement routes, for example, via company credit cards that may not feature on the asset database.
It is impossible to enforce corporate standards without knowledge of such devices, resulting in potential security risks and compliance breaches. Shadow IT and procurement of non-standard devices also add complexity to day-to-day support and management and cost to the bottom line.
Cooperating with a global IT vendor like Egiss, missing viability within your organisation, regardless of company complexity, is no longer a thing. Our procurement services ensure a full reporting suite based on spend, delivery, and asset information, keeping you in control.
Unnecessary cost creeps into your procurement cycle
Using various vendors for your IT hardware and tech device fleet across different departments or company locations is inefficient. This not only duplicates work for your procurement team but also hinders your organisation from benefiting from economies of scale.
Imagine procuring all company IT hardware from a single vendor instead of multiple. This would ease the process relating to each vendor, which slipstreams various administrative tasks such as creating purchase orders, matching invoices, managing terms and conditions, payment schedules, and contract renewals. These tasks create a significant paper trail, tying up human resources and slowing down the entire procurement-to-payment process, including contract negotiation, payment schedules, management information, and the organisation's balance sheet.
At Egiss, we are vendor-agnostic and offer to manage a wide range of OEMs, enabling us to be your single point of contact regarding the procurement of IT hardware on a global scale.
Supplier Base Rationalisation: A more streamlined procurement approach
Empowering Supplier-Based Rationalisation (SBR) as a strategic approach to revolutionising the way you procure IT hardware will indeed bring multiple benefits to your organisation and foster competitiveness in your specific market. Rationalising and standardising procurement-focused initiatives will reduce costs and complexity, improve performance, and free up resources. Here are just a few reasons why a paradigm shift in your procurement approach is worth considering:
Enable cost savings
Supplier rationalisation creates opportunities for cost savings through contract clean-up, fostering economies of scale and affecting your organisation's bottom line. We experienced a 25% reduction in the number of vendors, which has led to annual savings of up to 20% on tech spend. Furthermore, you’ll also reduce your warehousing, transportation, logistics, and inventory management costs.
Ease the complexity
Rationalising your supplier base will typically lead to less complexity in vendor management, freeing human resources within your team to focus on other things. Besides, downscaling your number of supplies will tend to gather points of contact to a minimum, ensuring larger visibility and control.
Build stronger relationships
One key advantage of rationalising your supply base is the ability to concentrate your efforts on the select suppliers who can deliver the most significant impact. By demonstrating a stronger commitment to quality vendors, you foster a mutual dedication that drives better results for your business.
Improve the quality of products and services
By discarding low-value and underperforming vendors from your supply base, you can enhance the overall supplier performance and improve the quality of the products and services your organisation procures.
Reduce risk
A larger supplier base inherently increases risk. Practising rationalisation among your supplier base empowers the opportunity to replace high-risk suppliers with more stable partners who are already part of your supply chain and have proven policies, procedures, and governance in place.
Gain full transparency
Improved visibility and reporting provide a clearer picture of your supply chain. You will gain insights into procurement patterns, supplier costs, their impact, etc., providing you with the basis for making the right long-term decisions.
Enhance agility
A streamlined supply base enhances the ability to respond to changing market conditions and evolving customer needs. Managing fewer suppliers reduces complexity, making it easier to pivot or scale operations as needed.
The scope of practising supplier base rationalising
The first step to bringing IT procurement back under control is to understand it. Once organisations have reviewed the suppliers for sourcing IT hardware and tech devices, software and services, they will be able to embark on a rationalisation exercise.
Identifying ways to rationalise your supply base by eliminating duplicative, low-value, and poor-performing suppliers seems daunting at first glance. The process demands significant effort, relevant competencies, and considerable patience. This undertaking involves thoroughly analysing your current suppliers, evaluating their performance, and understanding your procurement needs. All this requires a strategic approach where decisions are made based on cost and the value each supplier brings to your business.
Choosing Egiss as a global supplier of IT hardware enables rationalising your supplier base. Utilise our experience rationalising the supplier base of more than 60 global companies spread across locations in more than 150 countries.
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